Chennai-based public-sector lender Indian Overseas Bank (IOB) on Monday said the proposed move to utilise the share premium account balance to set off the accumulated losses is to right-size the balance sheet as well as adopt best corporate governance, which will help give stakeholders clarity about the financials of the bank.
The bank clarified that the move will not impact its equity capital structure. On the benefit side, IOB would be in a position to declare dividends sooner, with a clean balance sheet, as the bank had posted 29 per cent growth in operating profit in the second quarter.
Talking to media persons here, R Subramania Kumar, managing director and CEO, IOB, said the exercise is being carried out to provide stakeholders a true and clean picture of the balance sheet. The move is the extension of the turnaround strategy it had adopted after the RBI put the bank under watchlist, following accumulation of bad assets.
Clarifying on some specific issues, Subramania Kumar said the bank’s liability and commitment before and after the cleaning of the balance sheet will remain the same. “This act of ours is only to provide an exact picture of the balance sheet to the existing investors to understand the position and to the future investors, especially the minority shareholders, to take a very well informed decision about the bank,” he said.
Kumar also said the recovery of the bank has doubled, which proves that arresting of the slippage and increasing of the recovery has worked according to the bank’s turnaround strategy. “Recovery does not stop with corporate accounts and other accounts,” he added.
The board of directors of IOB had on last Thursday approved utilisation of the balance available in the share premium account amounting to Rs 7,650 crore to set off the accumulated losses of the bank to the tune of Rs 6,979 crore. The bank has convened an extraordinary general meeting of shareholders on Tuesday, January 30, 2018 in Chennai for obtaining their nod.